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Posted: May 1, 2017

Settlement Agreement’s Release and Integration Clause Barred Fraudulent Inducement Claims

On April 18, 2017, Justice Singh of the New York County Commercial Division issued a decision in Glodek v. Kadmon Holdings, LLC, 2017 NY Slip Op. 30749(U), holding that a settlement agreement’s release and integration clause barred a fraudulent inducement claim, explaining:

Defendants’ motion to dismiss plaintiffs causes of action for fraudulent inducement and breach of the duty of good faith and fair dealing on the grounds that the general release bars the present action is granted. Generally, a valid release constitutes a complete bar to an action on a claim which is the subject of the release. If the language of a release is clear and unambiguous, the signing of a release is a jural act binding on the parties. A release is governed by principles of contract law and one that is complete, clear and unambiguous on its face must be enforced according to the plain meaning of its terms.

. . .

Plaintiff has not adequately alleged that the release at issue is ambiguous on its face. Here, the release states

Any claims … whatsoever … of any type or kind, whether known or unknown … which [Glodek] ever had, now have or hereafter shall have against [Defendants] … for, upon or by reason of any … thing whatsoever and without limitation, from the beginning of time to the date of this Settlement Agreement.

Accepting the allegations of the complaint as true and providing plaintiff the benefit of every possible favorable inference, as this court must on a motion to dismiss, plaintiffs claims are barred by the release. Plaintiff unequivocally accepted and assumed the risk of some possible difference in fact from the facts now believed by them to be true. Additionally, Glodek represented that he is not relying on any representations not expressly set forth in this Settlement Agreement and received no representations or warranties from the Kadmon Parties, with respect to the Settlement Securities, including the value of the Settlement Securities. Finally, Glodek warranted that no Party to the Settlement Agreement has made any promise, representation or warranty, express or implied, not contained in the Settlement Agreement to induce any Party to execute this Settlement Agreement and that he was not relying on any promise; representation or warranty not contained in this Settlement Agreement.

In other words, the release encompassed any and all negotiations up to and including the date of the Settlement Agreement. This language encompassed statements made during negotiations of the Settlement Agreement. A release may encompass unknown claims, including unknown fraud claims, if the parties so intend and the agreement is fairly and knowingly made.

(Internal quotations and citations omitted).

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